The question to ask yourself is, could you cope? If you lost your wage, would you still be able to pay the mortgage repayments, the household bills or any other expenses you currently have? If the answer is no, then you might want to consider taking out an income protection policy.
Income protection can provide you with a regular income should you be unable to work due to illness or injury. The policy can make sure you receive an income until the day you’re ready to return to work again, which takes a lot of pressure off your shoulders during what could be a stressful time.
What is income protection insurance?
Income protection is something you should consider having in place if you wouldn’t be able to meet your financial commitments if you were unable to work.
Some people don’t think they need it because they have sick pay through their employer. Although this might be correct, it’s worth reading your employee contract closely to see exactly what sick pay you’re entitled to, as it might be less than you think. It may cover you for short-term sickness, but what if you were off for six months or more?
Income protection insurance usually covers a wide range of illnesses and situations and has the potential to pay out for many years, offering a great deal of peace of mind.
The cost of a policy will vary based on your individual circumstances and takes into consideration things such as your age, employment and health.
Do I really need income protection insurance?
While everyone can benefit from this type of insurance, there are some scenarios where it might not be necessary. Not sure it’s right for you? Ask yourself...
- Do you already get income protection insurance through work? Some employers offer this as a benefit.
- Do you have some other kind of illness insurance combined with another insurance policy or with your mortgage which covers you for serious illness?
- Do you have savings you can use instead of insurance?
If you do plan on relying on your savings, remember to be careful. Your money might not stretch to cover the amount of time you need to recover from a long period of ill-health. Likewise, you may find yourself depleting these funds if another emergency crops up.
How much does income protection payout?
It’s important to remember that your insurance won’t pay out the exact amount of money you were earning month on month. However, you should expect to receive around half or two-thirds of your salary.
You’ll receive less because some money will be taken off for the state benefits you might choose to claim, plus the income you receive won’t be subject to tax.
Can you make a claim straight away?
You can’t claim income protection payments straight away if you fall ill or develop a disability.
Typically you have to wait a minimum of four weeks but payments can start up to two years after you stop work. You might choose to wait before making a claim because you may get sick pay from your employer or you may be entitled to claim statutory sick pay for up to 28 weeks.
If you’d like to take out income protection or speak to a professional about it in more detail to decide whether it’s right for you or not, please get in touch with us today and our protection advisers can assess your circumstances and advise on the right protection policies for you.
